Staff shortages and backlog hampered IRS through 2022 filing season, says TIGTA
Continued staffing shortages and a growing backlog of certain filings significantly hampered IRS performance during the 2022 tax filing season that ended last month, the Treasury Inspector General for the Department reported. tax administration (TIGTA) in a preliminary audit.
The report, 2022 interim results Filing season (Rep’t No. 2022-40-035), dated May 2, provided insight into the IRS’ processing of returns amid its ongoing administrative challenges, measured between January 31, 2022 (a week after the start of the processing of individual declarations), and March 28, 2022. It builds on other more focused interim audits and previous reports and will be followed by a more in-depth review of the entire 2022 season, said TIGTA .
A major contributing factor to the IRS’s struggles has been having to implement several new pieces of legislation for the 2021 tax year, TIGTA noted, and the report includes an initial assessment of the service’s accuracy. in this regard. One of these provisions concerned art. 36B premium tax credit, and TIGTA also issued a final audit report, American Rescue Plan Act: Premium Tax Credit Provisions Implemented (Rep’t No. 2022-47-034), covering amendments to this credit that were enacted by the American Rescue Plan Act (ARPA), PL 117-2, including for the 2020 tax year.
Staffing plans failed
TIGTA’s findings suggest that the gains made by the IRS in expanding its workforce as planned have come too little or too late to significantly affect filing season operations. For example, as of March 15, 2022, the IRS had added 521 new employees to its submission processing unit, which was just 9.5% of its hiring target of 5,473, TIGTA reported. Hiring was most successful in its account management function, reaching 76.5% of its goal of 5,000 additional employees. However, TIGTA noted, account management employees are also responsible for answering toll-free telephone calls in addition to taxpayer correspondence – and both functions have further deteriorated during filing season.
The number of inbound toll-free calls answered in 2022 (as of March 4) was much lower in 2022, falling to 2,688,000 from 4,444,000 in 2021 (as of March 5), service level, or percentage response, falling to 19.5% in 2022 from 27.3% in 2021. And the average speed of answering these calls has increased from 18 minutes in 2021 to 24 minutes in 2022.
Processing of delayed taxpayer correspondence
Taxpayer correspondence also remained an Achilles heel. As of March 19, 2022, the account management inventory included 7.6 million cases – a relatively minor net difference from the 8 million cases the function held at the end of 2021. Cases exceeded in this inventory are remained an ongoing challenge, TIGTA reported. The IRS “has not taken any meaningful action to address the continued lack of quality customer service it provides to IRS correspondent taxpayers”, despite previous recommendations from TIGTA which it says could improve customer service. account.
Unlike other agencies and companies serving the public, “correspondence continues to be the primary method of taxpayer communication with the IRS,” TIGTA noted. “For example, taxpayers must mail correspondence to the IRS when resolving certain tax account issues, such as responding to a notice or letter from the IRS.” According to TIGTA, the IRS had no unopened mail at the end of 2021 (however, at the end of December 2021, approximately 5 million pieces of correspondence were still being processed, reported National Taxpayer Advocate Erin Collins), but 508,474 mail items were unopened as of March 12, 2022.
Almost static return backlog
Paper and amended returns also contribute to the problem, with both components of unprocessed returns being slightly lower in the week ending March 12, 2022, compared to the week ending December 31, 2021. Original paper returns have slightly decreased to nearly 4.5. million, compared to 4.7 million returns at the end of 2021, while rectified returns pending work fell from 2.38 million to 2.24 million. One possible reason is that the two categories of unprocessed declarations at the end of 2021 were higher than at the end of 2020 and an order of magnitude higher than those at the end of 2019. In comparison, the original paper returns pending processing at the end of 2019 were numbered only 183,000, and amended returns 110,443.
Implementation of new laws appears generally correct
Better results were reported with respect to the IRS’ implementation of statutory changes to individual tax credits, which included an expanded credit for children and dependents, an expanded child tax credit and partially prepaid, an expanded earned income tax credit and changes to the premium tax credit. TIGTA has reviewed the Service’s “electronic file business rules” and error resolution codes applied to modifications for accuracy. TIGTA said it is still testing these business rules and error codes with respect to the Child and Dependent Credit and the Premium Tax Credit.
But TIGTA’s testing of the child tax credit rules, including advance payments, “showed they are working as intended”. As of March 2, 2022, the IRS has processed more than 14.9 million returns claiming $82.7 billion in child tax credits, of which $33.7 million was prepaid in 2021. A separate ongoing review will assess whether taxpayers have correctly reconciled prepayments with their final credit amounts.
Similarly, TIGTA said the premium tax credit business rules worked as expected, although it was still testing its error resolution codes.
ARPA Premium Tax Credit Changes
In the second report, on the IRS’ implementation of ARPA’s premium tax credit provisions more generally, TIGTA said the IRS generally correctly adjusted refunds of credit amounts. advance premium tax credits taxpayers received for the 2020 tax year, for which ARPA retroactively removed the requirement to repay any excess advance credit. However, a “clerical error” in September 2021 resulted in erroneously excessive refunds to a few thousand taxpayers. The IRS eventually reversed these transactions for all but two taxpayers and, as of December 3, 2021, had recovered $9.1 million, or 76% of the excess refunds issued.
Also with respect to tax year 2020 filings, TIGTA has identified more than 30,000 taxpayers for whom advance premium tax credit adjustments made them eligible to claim additional child tax credits, but the IRS was unable to make this follow-up adjustment and did not initially notify the affected taxpayers to file an amended return claiming the additional child tax credit amounts. The IRS had agreed to update its website and send affected taxpayers a notice to that effect, TIGTA reported.
Another ARPA premium tax credit change affected tax year 2021 filings: Taxpayers who received or were entitled to receive unemployment compensation for at least one week in 2021 were treated as meeting credit eligibility limits, and a household income limit was relaxed. TIGTA found that the IRS had not developed procedures to verify taxpayers’ statements regarding receipt of unemployment compensation for this purpose. Thus, TIGTA recommended in September 2021 that the IRS require documentation from taxpayers and try to identify returns with potentially questionable claims, such as when a return yields no unemployment compensation income. The IRS disagreed or partially disagreed with most of those recommendations, but said it plans to verify unemployment receipt “as part of its post-processing compliance efforts.”
The AICPA continues to advocate for better IRS services; visit the webpage describing AICPA’s advocacy efforts to learn more.
— To comment on this article or suggest an idea for another article, contact Paul Bonner at [email protected].